Bucharest GMT + 2
EY
Bucharest Tower Center Building, 19th Floor
15-17 Ion Mihalache Blvd.
Sector 1
011171 Bucharest Romania
Executive contact
Claudia Sofianu
+40 (21) 402-4000
Fax: +40 (21) 310-7219 Email: claudia.sofianu@ro.ey.com
On 1 July 2021, the exchange rate between the Romanian leu and the euro was RON4.9261 = EUR1.
A. Income tax
Who is liable. Individuals domiciled in Romania are considered to be tax residents and are taxed on their worldwide income (with certain exceptions). Under certain circumstances, individuals who are not domiciled in Romania may be subject to tax on their Romanian-source income, regardless of where the income is re ceived. In the absence of a tax-residency certificate issued by another state based on a double tax treaty, a foreign individual or one who carries out independent activities through a permanent establishment in Romania becomes subject to tax on worldwide income beginning on the date on which the tax-residency criteria are met.
Individuals in Romania who are also residents of a country that has entered into a double tax treaty with Romania may benefit from a reduced tax rate or a tax exemption under the terms of the relevant treaty. If a foreign individual spends less than 183 days in Romania and if the salary costs for the individual are not recharged to Romania, he or she may be exempt from Romanian salary tax liabilities, provided that a tax residency certificate is available. Individuals in Romania who are tax residents in coun tries that have not entered into a double tax treaty with Romania are subject to tax in Romania from their first day of presence in the country.
A Romanian tax resident who is domiciled in Romania and who demonstrates a change of residency to a country that does not have a double tax treaty with Romania continues to be subject to tax on any worldwide income for the calendar year in which the change of residency occurs and for the next three calendar years.
Income subject to tax. A flat tax rate of 10% applies to salary income, income from freelance activities, income from intellec tual property rights, rental income, pension income, investments, prizes, investment income, agricultural, forestry and fisheries income, and other types of income. Special tax rates apply to
income such as dividends and income from gambling and trans fer of property ownership. The taxation of various types of income is summarized below.
Employment income. Taxable compensation includes the following:
• Salaries
• Benefits in cash or kind (for example, allowances and perquisites)
• Wage premiums
• Rewards
• Temporary disability payments
• Paid holidays
• Other income received by an individual based on an employ ment agreement, document for appointing civil servants, sec ondment agreement or a special statute in the law
• Fees and compensation paid to directors and managers of private enterprises and to members of the board of directors, general shareholders meeting, administration council and audit com mittee
The monthly tax on employment income is determined by deduct ing mandatory social security charges, personal deductions, trade union contributions, employee contributions to the voluntary occu pational pension scheme and contributions to the voluntary health insurance scheme cumulated with medical subscription services (an alternative branch of services offered by certain private health care companies by means of subscription). Each of the deductions for voluntary pension and voluntary health insurance is capped to a maximum of the equivalent in Romanian currency of EUR400 per year per participant (the limit of EUR400 represents a cumula tive cap in the case of voluntary health insurance premiums and medical subscription services).
Income from independent activities. Income from independent activities includes income from production activities, income from commerce, income from rendering of services and income from freelance activities, whether performed individually and/or in a form of association, as well as related activities.
The net taxable income from freelance activities is computed as gross income less specified deductible expenses. Individuals engaged in freelance activities must make tax payments by 25 May of the following year. In the case of independent activi ties performed under contracts for sports activity, the income payer (the legal entity or other entity that has the obligation to maintain accounting records) must assess, withhold and pay the related income tax on a monthly basis.
Income derived by individuals from rental for tourism purposes of rooms located in their own homes, with a capacity for accom modation of more than five rooms is assessed as income from independent activities and is subject to tax based on the real system (actual income recorded based on the single-entry sys tem).
Income from intellectual property rights. Income from intellec tual property rights includes income from the selling of any form of intellectual property rights, including the following:
• Copyrights and rights related to copyrights, including the cre ation of monumental art works
• Patents
In the case of income from intellectual property rights derived from legal entities or other entities required to maintain account ing records, the income payer must assess, withhold and pay the related income tax on a monthly basis, by the 25th day of the month following the month it was withheld.
If the income from intellectual property rights is not derived from legal entities or other entities required to maintain accounting records, the taxpayer must pay the related income tax to the state budget.
Taxable income from intellectual property rights is computed by deducting from gross income expenses representing 40% of gross income.
Rental income. Gross rental income consists of amounts in cash or kind that are stipulated in rental agreements, as well as certain expenses borne by the tenant that are the landlord’s liability according to the law. The rental income is taxable in the tax year to which the rent relates, regardless of when the rent is effec tively received.
Rental income also includes income derived by owners from the rental of rooms located in their own homes, with a capacity for tourist accommodation ranging from one room to five rooms.
If individuals are earning rental income from more than five rental contracts at the end of a tax year, such income is reassessed as income from independent activities beginning with the follow ing year, and it is accordingly subject to the rules applicable to that category.
Taxable rental income is generally determined by subtracting from gross rental income a deduction equal to 40% of gross income. Tax on rental income is determined by applying a rate of 10% to the taxable amount. As an exception, taxpayers may opt for the determination of the net rental income based on singleentry accounting.
Investment income. Investment income includes the following:
• Dividend income
• Interest income
• Gains from transfers of securities (including stock option plans) and other operations involving financial instruments (including derivatives)
• Income from the transfer of financial gold
• Income from the liquidation of a legal entity
The first four of these categories of investment income are dis cussed below.
Dividends are any grant of benefits in cash or kind by a legal entity to shareholders or associates as a result of holding partici pation titles (with certain exceptions). The tax rate applicable to dividends distributed to resident individuals is 5%. The tax rate
is calculated, withheld and paid by the payer of dividend. The tax must be paid by the 25th day of the month following the dividend payment. For dividends declared but not paid until the end of the year, the tax is payable by 25 January of the following year. Amounts received from holding participation titles in closed investment funds are treated similarly to dividends. A 5% final withholding tax is imposed on dividends.
Taxable income from interest is considered to be any interest from current account or sight deposits, term deposits, savings instruments and civil contracts or interest paid by the company issuing debt securities during the loan period. A 10% final with holding tax is imposed on interest income. The tax must be remit ted by the 25th day of the following month.
Capital gains derived from transfers of securities (including stock option plans) and other operations involving financial instru ments (including derivatives) are subject to a 10% income tax. In general, the capital gain equals the positive difference between the sale price and fiscal value of the securities, which includes the related transaction costs. A capital gain on a sale of shares obtained as a result of a stock option plan equals the difference between the sale price and the fiscal value (preferential acquisi tion price), which includes the related transaction costs. For shares obtained for a nil price, the fiscal value is considered to be zero.
Gains or losses derived from the operations with financial gold equal the positive or negative difference between the sales price and the fiscal value, which includes the costs related to the trans action.
Under the “net capital gain” concept, the difference between gains and losses registered during one year (that is, the positive or negative differences between the sale and fiscal value, which includes the related transaction costs) is calculated.
Income from the transfer of securities, other operations involving financial instruments and from the transfer of financial gold (financial gold is gold purchased for the purpose of creating a reserve and also for use as an investment instrument) is subject to an annual regularization, which is performed by applying a 10% tax rate to the annual taxable income, less tax losses carried forward (if any). Losses may be carried forward for seven years.
Income from other sources. Any income from other sources, as defined by the law, is subject to a 10% income tax, calculated, withheld and paid by the payer of such income.
Income whose source is not identified. Any income whose source is not identified is subject to a 16% income tax applied to the tax base adjusted according to the procedures and indirect methods for the reconstitution of revenues or expenses. The tax authorities compute the income tax and late payment penalties.
Deductions. Individuals domiciled in Romania and individuals meeting a certain residence condition for worldwide income taxa tion are entitled to personal deductions, which vary according to gross monthly income and number of dependents of the individuals. For gross monthly income up to RON1,950, the monthly deductions
vary between RON510 for individuals without dependents and RON1,310 for individuals with four or more dependents. For gross monthly income between RON1,951 and RON3,600, personal deductions are degressive in relation to the above. No deduction is allowed for gross monthly income greater than RON3,600.
Rates. As discussed in Income subject to tax, most types of income are subject to tax at a flat rate of 10%.
B. Other taxes
Inheritance and gift taxes. No taxes are levied on inheritances or gifts, except for revenue subsequently derived from these items.
Property taxes. For property tax purposes, the taxable value of a property is computed based on multiple factors, including but not limited to, the following:
• Property surface
• Type of building
• Location of the property
• Age of the building
• Potential construction works
• Purpose for which the property is used (i.e., residential or non residential)
Each Local Council establishes the applicable rate.
C. Social security and health care charges
Income subject to social security and health care charges is dis cussed below.
Employment income. The following rates are applicable for employment income:
• Employee social charges: 35% (25% pension contribution and 10% health fund contribution)
• Employer social charges: 2.25% (representing the work insur ance contribution, which includes unemployment, medical leave, work accidents and the salary guarantee fund)
Private income (other than employment income). The following types of private income, other than employment income, are subject to social security contributions:
• Income from independent activities
• Income from intellectual property rights
Under certain conditions, individuals who derive income from independent activities and/or intellectual property rights are lia ble to pay social security contributions if the cumulated net annual income exceeds 12 minimum salaries per economy (approximately EUR5,600 for 2021). The contribution rate of 25% is applied to an amount chosen by the taxpayer that cannot be lower than 12 minimum national salaries per economy.
The following types of private income, other than employment income, are subject to the health fund contribution:
• Income from independent activities
• Income from intellectual property rights
• Rental income
• Agricultural, forestry and fisheries income
• Investment income
• Income from other sources, as provided by the law
Under certain conditions, individuals who derive income from one or more of the abovementioned sources are liable to pay health fund contribution if the cumulated net annual income exceeds 12 minimum salaries per economy (approximately EUR5,600 for 2021). The contribution of 10% is applied to a capped computation base of 12 minimum national salaries per economy.
Citizens of European Economic Area (EEA) countries, Switzerland and the United Kingdom benefit from the coverage of medical expenses incurred in Romania and may be exempted from social security charges if relevant European certificates are obtained. However, if an individual is not subject to social security charges in his or her home country, he or she falls under the Romanian social security system and is liable to pay social security charges in accordance with Romanian regulations (the home-country employer or the employee must follow a certain procedure to register for social security purposes).
Totalization agreements. Romania has entered into totalization agreements with the following jurisdictions.
Albania (a)
Libya (a)
Quebec (c)
Algeria (a) North Macedonia (a) Serbia (c)
Canada (b) Moldova (c) Turkey (c)
Israel (b) Peru (a) USSR (d) Korea (South) (b)
(a) No administrative procedures have been put in place. Consequently, the agree ment is not applicable.
(b) The agreement covers pension contributions only. It provides exceptions from paying contributions in case of assignment.
(c) The agreement covers pensions, health indemnity, medical leave indemnities and work accidents. It provides exceptions from paying contributions in case of assignment.
(d) The 1961 agreement with the USSR applies to the former USSR republics of Armenia, Belarus, the Russian Federation and Ukraine. It covers pension and medical leave indemnities. It does not contain any assignment provisions or exceptions from paying contributions.
D. Tax filing and payment
Foreign nationals assigned to work in Romania and who do not meet the tax exemption conditions must register for tax purposes within 30 days after beginning their assignment. Subsequently, they must file monthly tax returns, and pay income tax and social security charges (if applicable) by the 25th day of the following month.
If the individual is on a local payroll, the local employer must compute, withhold, declare and pay the income tax and social security charges (if applicable).
E. Double tax relief and tax treaties
Romania has entered into double tax treaties with the following jurisdictions.
Albania India Qatar
Algeria Indonesia Russian Armenia Iran Federation
Australia Ireland San Marino
Austria Israel Saudi Arabia
Azerbaijan Italy Serbia
Bangladesh Japan Singapore Belarus Jordan Slovak Republic
Belgium Kazakhstan Slovenia
Bosnia and Korea (North)
South Africa
Herzegovina Korea (South) Spain
Bulgaria Kuwait Sri Lanka
Canada Latvia Sudan
China Mainland Lebanon Sweden
Croatia Lithuania Switzerland
Cyprus Luxembourg Syria
Czech Malaysia
Tajikistan
Republic Malta Thailand
Denmark Mexico Tunisia Ecuador Moldova Turkey
Egypt Montenegro
Turkmenistan
Estonia Morocco Ukraine Ethiopia Namibia United Arab
Finland Netherlands Emirates
France Nigeria United Kingdom
Georgia North Macedonia United States
Germany Norway Uruguay Greece Pakistan Uzbekistan
Hong Kong Philippines Vietnam Hungary Poland Zambia Iceland Portugal
F. Entry visas
Citizens of the European Union (EU) and EEA member states may enter Romania without any visa requirements and stay for a period not exceeding 90 consecutive days in a single visit. Citizens of the following jurisdictions may also enter Romania without a visa and stay there for 90 days in any 180-day period.
Albania (c) Israel Seychelles
Andorra Japan Singapore
Antigua and Kiribati Solomon Islands
Barbuda Korea (South) St. Kitts
Argentina Macau (b) and Nevis
Australia Malaysia St. Lucia
Bahamas Marshall Islands St. Vincent and Barbados Mauritius the Grenadines
Bosnia and Mexico Taiwan (e)
Herzegovina (c) Micronesia Timor-Leste
Brazil Moldova (c) Tonga
Brunei Darussalam Monaco Trinidad and Canada Montenegro (c) Tobago
Chile New Zealand
Tuvalu
Colombia Nicaragua Ukraine (c)
Costa Rica North Macedonia (c) United Arab
Dominica Palau Emirates
El Salvador Panama United Kingdom
Georgia (c) Paraguay United States
Grenada Peru Uruguay
Guatemala Samoa Vanuatu Honduras San Marino Vatican City
Hong Kong (a) Serbia (c)(d) Venezuela
(a) The exemption from the visa obligation applies only to Hong Kong passport holders.
(b) The exemption from the visa obligation applies only to Macau passport holders.
(c) The exemption from the visa requirement applies only to holders of biometric passports.
(d) The exemption does not apply to holders of Serbian passports issued by the Department of Serbian Coordination (Koordinaciona Uprava).
(e) The exception from the visa obligation applies only to holders of passports issued in Taiwan that contain the identification card number.
In addition, the exemption from the visa requirement applies to British nationals of a territory subordinated to the British govern ment.
Citizens of other countries can obtain short-term or long-term visas, which may be single- or multiple-entry visas. Special conditions apply to foreign nationals planning to set up businesses in Romania. Foreign citizens can obtain special short-term, multipleentry visas for frequent business trips.
G. Work authorizations
EU, EEA and Swiss nationals can be seconded to Romania with out obtaining a work authorization. The seconded individuals must apply directly for a registration certificate.
In addition, companies based in Switzerland or EU or EEA mem ber states can second non-EU/EEA/Swiss nationals to Romania without obtaining a work authorization. The seconded individu als must apply directly for a residence permit and are required to present to the Romanian authorities the valid residence permit obtained from Switzerland or an EU/EEA member state.
The secondment of non-EU nationals (third-country nationals) is limited to one year within a five-year period. An extension of their stay in Romania may be granted if a work authorization for local employment purposes is obtained. Foreigners assigned as heads of foreign company branches and foreign citizens named administrators of Romanian companies only need to apply for the long-term visa and the residence permit.
As of September 2016, the EU directive with respect to intracompany transfer (ICT) workers has been transposed in the Ro manian immigration legislation. Therefore, employees of companies outside the EU, EEA and Switzerland who are subject to an ICT in a leadership position or as a specialist can be sec onded to Romania for a period of up to three years under certain conditions. A new type of work authorization for secondment purposes — the ICT work authorization — has been introduced. The secondment can be extended after the initial period of three years if the ICT worker leaves Romania and fulfills the condi tions for initiating a new secondment process. Foreigners must be hired by a Romanian company before the assignment ends, or immediately after, if they want to continue carrying out activities in Romania without interruption.
H. Residence permits
Both short-term and long-term visas allow foreign nationals to stay for up to 90 days within a 180-day period from the date of entry to their date of exit from Romania. Although the short-term visa cannot be extended, the long-term visa can be extended
through an application for a residence permit. The following documents are required for a visa extension:
• Work authorization for the categories of individuals who are required to obtain a work authorization for performing activi ties in Romania
• Medical insurance for the visa period
• Medical certificate attesting that the individual is in good health
• Proof of accommodation and means of support in Romania
• Other documents, depending on the purpose of the stay
Similar residence permits can be issued to immediate family members (that is, spouse, children, parents and parents-in-law, if these family members cannot support themselves and do not benefit from family support in the home country) accompanying an individual during his or her assignment in Romania.
I. Family and personal considerations
Family members. The spouse of a foreign national holding a local work authorization must apply for a separate work authorization if the spouse wishes to work in Romania. If the spouse obtains a work authorization while being in Romania and holding a residence permit, there is no need to obtain a new long-term visa. The spouse who obtained the work authorization can either choose to keep the residence permit for family reunification purposes or apply for a residence permit for employment pur poses.
Customs regulations for individuals. Special duty treatment is pro vided for the personal belongings of individuals establishing domi cile or residence in Romania, goods introduced into Romania on marriage, inherited goods and household goods used for furnishing a residence in Romania and personal effects shipped through par cel and postal services. For certain goods, such as tobacco products and alcoholic beverages, duty exemption is granted within pre scribed quantities.
Driver’s permits. Driver’s licenses issued in another EU member state are recognized in Romania if the license remains valid in the issuing country. Romania also recognizes national or interna tional driver’s permits issued by the relevant authorities in coun tries that have signed the International Convention of Traffic (Vienna 1968).
The current legislation does not require foreigners who have a valid Romanian residence permit to exchange their foreign driv er’s license for a Romanian one. However, it is recommended an individual obtain the Romanian driver’s license if the foreign driver’s license is not issued in an international language (English or French). An alternative is that a foreigner carry a legalized translation of the foreign driver’s license when driving.